Drop in income gives rise to Engel's coefficient

January 19, 2018

The Japan Research Institute of Labor Movement (Rodo-soken) on January 18 published the results of its analysis showing that Engel's coefficient in Japan
has increased because of a decrease in household income.

According to the Rodo-soken data, Japan was the only country where workers' wages dropped during the past four years among the Group of Seven industrialized countries plus South Korea.

The Engel's coefficient in Japan for many years had stayed around 21% or 22%, but the rate became 24.4% in 2016, up 1.8 points from 2012 when the second Abe Cabinet was inaugurated.

By annual income stratum, the proportion of spending on food in the bottom tier (less than 3.41 million yen) rose by 1.9 points to 26.6%. Even in the top bracket (8.35 million yen or more), the percentage accounted for 24.4%, a rise of 1.5 points.

The labor think tank pointed out that the absence of income redistribution and the government policy of cutting back social welfare programs widened the gap in people's spendable earnings, and that all income brackets experienced a decrease in their deposits and savings, except for the upper end of spectrum.

Rodo-soken suggested that an increase of 20,000 yen in monthly wages will make it possible for living standards to return to the level it was in 2012.